Alexander Group conducts ongoing research using surveys, industry studies, executive interviews and project work to provide medical industry leaders with the quantitative and qualitative data to help shape their commercial strategies.
Our recent research points to five key trends:
1. Increased revenue growth in an SG&A-constrained environment
Revenue growth has returned to the U.S. med tech industry. Year-over-year revenue growth topped five percent last year, rebounding from a low of three percent in 2014. However, significant gross margin pressures have forced medical device companies to rethink their existing commercial models. Sales organizations are increasing revenue growth and investment, especially in their solutions and product portfolios. Those companies that embrace innovative commercial models can produce sales growth that is 3X the industry average and commercial investment levels well above average. Central to this kind of success is an agile go-to-customer model.
Financial objectives and market forces continue to place downward pressure on expense-to-revenue ratios, a trend that shows no sign of relenting with margins expected to continue dropping by 100 basis points per year. In this environment, companies must find resourceful ways to maximize “feet on the street” while at the same time deploy highly technical sellers to launch their new products−all in a more budget-constrained world than ever before.
2. Deployment of intelligently specialized and efficient customer-facing models that drive growth in core businesses while introducing innovative solutions
Due to the changing environment, sales and marketing organizations are moving beyond traditional sales representatives, especially as it relates to the core of medical device companies’ solutions and product portfolios.
Companies are deploying agile go-to-customer models that intelligently specialize and deploy the right job roles at the right resource levels in the right places. These new go-to-customer models decrease emphasis on the traditional field rep and include increased emphasis on the following roles:
Additionally, the industry has begun to shift from products focused on clinicians to products and solutions that provide tangible outcomes for doctors, health systems and products. Investment in the industry is focused on novel devices that treat complex diseases, diagnostic solutions that focus on early detection, and leveraging data from connected products to influence treatment algorithms. These connected devices will provide data on patient outcomes which will help justify the products’ benefits. The challenge comes in communicating these key value propositions. Our research found that 72 percent of study respondents felt it was important to offer connected products in their solutions. However, only 42 percent believed they had the ability to sell them. As a result, many sales leaders are considering investing in a support role to help communicate with IT departments. These types of solutions and competitive landscape are quickly changing in the industry.
3. Targeting non-acute sector via revenue motions that focus on economic benefits rather than clinical ones
While hospitals remain the main source of revenue for medical device firms, post-acute care continues to gain importance. In fact, Alexander Group’s research shows 67 percent of organizations recognize the shift of procedures from acute to post-acute and other outpatient facilities as important to their go-to-customer model. But only one-third of those companies feel they are ready for this shift. The top trends that are causing the industry to stand up and take notice of the post-acute sector include:
4. New agile go-to-customer models to manage across all revenue motions: along with the deployment of the right job roles in the right proportions and places
Identifying and leveraging revenue motions in the development of commercial models is becoming more critical. Growing solution complexity and differentiated customer demands across the portfolio drive the need to develop jobs with revenue motions in mind. Three significant revenue motions require consideration.
All commercial models require all selling motions. One is not better than the other. For most companies, their core offerings belong to the fulfillment family of revenue motions while advocacy selling is often most associated with the key account function. But the industry’s legacy is focused on innovation, which continues to act as an important motion and growth lever for companies.
5. Rising total sales compensation due to increased turnover and the challenging talent acquisition and retention environment
Increased industry growth and renewed commercial investment have begun to create a war for talent. For many years, sales compensation levels were depressed and sellers had limited options. Now as millennials become a larger portion of the workforce, they are increasingly seeking higher base salaries and enhanced benefits. Our research found that base salaries have increased by 15 percent since 2014. There is an increase in turnover among high performers. As one vice president of sales put it, “There is always someone willing to pay more.”
Visit the Alexander Group’s medical research findings page to view our library of resources and request a complimentary briefing.